Asian markets follow Wall St down as traders eye Fed meeting

Asian markets struggle with inflation, rates back in focus


Hong Kong: Asian markets were struggling under the moderate leadership of Wall Street on Wednesday. As Omicron’s worries faded temporarily, inflation and expected interest rate hikes became the focus of attention again.

Although the new Covid variant continues to spread rapidly around the world, forcing the government to maintain containment measures, its apparently milder symptoms allow traders to pay more attention to future economic policies and plans to curb soaring prices.

Later Wednesday, the minutes of the Federal Reserve’s December interest rate meeting will be released. Traders hope that these minutes will give people a clearer understanding of the officials’ policy plans.

That is followed by Friday’s jobs data for last month that could play a key role in their next deliberations.

With the bank due to end its vast bond-buying stimulus programme by March, commentators are debating when and how many times the Fed will hike borrowing costs as it tries to overcome inflation running at a pace not seen in decades.

“One of the more dovish Fed members, Neil Kashkari, said he supports two rate increases this year, which might mean pricing in three rate hikes this year might not be enough,” said OANDA’s Edward Moya.

Standard Chartered Bank’s Steve England added: “Earlier, we thought that interest rate hikes would not occur until mid-2022, but the Fed seems to have reached a consensus to accelerate downscaling and raise interest rates as soon as possible.”

Despite this, he is still optimistic about the market outlook and said: “But we don’t think inflation dynamics will support continued interest rate hikes.

“We suspect the biggest driver of asset markets will be when inflation and Covid fears begin to ebb.”

After ringing up new record highs on Monday, the S&P 500 fell on Wall Street, while the Nasdaq sank more than one percent as tech firms — which generally rely on debt and low rates to fuel growth — took a hit.

However, the Dow edged to a new all-time high.

Chinese technology firms, which have also been hit by a crackdown from the government, were a big drag on Hong Kong as it sank more than one percent while Shanghai, Sydney and Seoul also fell.

Wellington, Taipei and Jakarta rose along with Manila where trading resumed after being cancelled Tuesday owing to a technical glitch. Tokyo was flat with the yen holding losses at a four-year low against the dollar.

In company news, following the confrontation between Beijing and Washington, after the telecommunications giant delisted in New York, China Mobile soared by more than 9% after its debut in Shanghai.

According to Bloomberg News, after the company exercises its over-allotment option, the stock offering is expected to raise US$8.8 billion, making it the largest stock in China’s domestic stock market in more than a decade.

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